The massive increase in interest rates 2023 had a significant impact on Loans and savings deposits. The National Bank has now presented extensive data that could, for example, help to objectify the debate about “too low” savings interest rates.
The coincidence in time also caused distortions more expensive loans, high construction costs and on top of that stricter credit rules. But what was really to blame for the sharp drop in new loan business? Banks and politicians have sharply criticized the credit rules until they have now been made less bureaucratic.
What is the situation now on the credit side?
Overall, loans to private households fell in 2023 for the first time since the survey began in 1998.
The outstanding loan volume fell from 189.7 to 186.3 billion euros. This development was primarily due to housing loans. The inventory there fell from 134 to 131 billion euros. However, a similar development was observed throughout the euro area. For Central Bank Vice President Gottfried Haber, this is evidence that it was primarily the increased interest rates and not the stricter application of credit rules that were to blame for the downward trend.
How are new housing loans being granted?
There was a massive drop here from 25.7 billion (2021) and 23.2 billion (2022) to just 10.4 billion euros in the previous year and thus the lowest value since 2011. In Austria between 2017 and 2022 there were also Significantly more new housing loans were granted than in the euro area or Germany, which is why the slump in this country may have been more pronounced. The level has now come a lot closer. And thanks to the stricter credit rules, credit quality has also improved significantly, says Haber. This can be seen in historically low default rates.
How are variable and fixed interest loans distributed in Austria?
In Austria there is traditionally a high proportion of variable loans. Many borrowers are apparently betting that the low interest rate phase of previous years will last for a very long time. That wasn’t the case. The six key interest rate hikes by the ECB therefore had a huge impact.
The average interest rate on a housing loan in Austria in January 2024 was 3.24 percent, significantly higher than that of the euro area (2.42 percent) and thus at the highest level since 2012. However, this was below the level at the outbreak of the financial crisis (October 2008: 5.71 percent.)
In any case, borrowers have shifted massively: in 2018, 73 percent of all housing loans had variable interest rates and only 27 percent had fixed interest rates. Now only 43 percent have variable interest rates and 57 percent have fixed interest rates. And this despite the market clearly expecting the ECB to cut key interest rates again this year.
How have interest rates developed in 2023?
Interest rates are now falling slightly again, but at the end of 2023 they had reached their highest level in new business with private individuals and companies since the 2008 financial crisis.
This was the case for loans in November with 5.10 percent, and for deposits in October 2023 with an average of 3.66 percent. After this ceiling, the average loan interest rate fell again to 4.99 percent; for deposits it is 3.48 percent across all terms (values for January 2024).
Have the banks cashed in with high lending rates but low savings rates?
The difference between loan and savings interest rates, the so-called interest rate margin, averaged 1.55 percentage points in Austria in 2023 and was therefore definitely in line with the average of recent years. In the euro area, the interest rate spread was even slightly higher at 1.73 percentage points.
